Why III. hospitals ended deal
Ill. hospitals part; Pa. deal inches forward
Amid the ongoing national wave of hospital mergers, two health systems in Rockford, Ill., decided last week to abandon plans to combine operations following stiff opposition from regulators in the Federal Trade Commission.
Rockford, a three-hospital city in northern Illinois, was no stranger to such news. The April 12 announcement that OSF Healthcare System had abandoned plans to acquire Rock- ford Health System marked the third hospitalconsolidation proposal in 24 years there to fail, and the second one to stop after adverse court decisions stemming from government challenges.
A week earlier, U.S. District Judge Frederick Kapala imposed a preliminary injunction halting the transaction until all appeals were exhausted because he found that the FTC had proven that its argument that the merger would give the combined system 64% of the market for acute care was likely to prevail in court. That decision raised the prospect of a two-year legal battle for the hospitals.
Meanwhile in Pittsburgh last week, the financially struggling West Penn Allegheny Health System got a dose of good news in its quest to be acquired by the region’s dominant insurance plan, Highmark.
In what attorneys said was an unusual move, the U.S. Justice Department issued a public statement April 10 announcing that it was closing an in-depth antitrust investigation into Highmark’s purchase of West Penn Allegheny. The statement explained that the decision was based on a finding that the acquisition was likely to actually increase competition in the market.
Specifically, Justice Department officials wrote that the affiliation would assure a much-needed infusion of up to $475 million into Pittsburgh’s second-largest healthcare provider, and that Highmark and West Penn had virtually no overlapping ownership in hospital or physician services. Legal observers also noted that UPMC, the region’s largest provider, has its own integrated health plan.
The two decisions last week had notable differences, including the investigating agencies— FTC in Rockford, Justice in Pittsburgh—as well as the structure of deals. Rockford was considered a horizontal merger because the acquirer